By 1997, the first sale was completed. Kansanshi mine, the site of some of Africa's oldest copper mining and smelting activities, went to Cyprus AMAX based in the USA.240
Some of ZCCM's other assets then went to various companies that had formerly been part of the Kafue Consortium. Avmin bought what became Chambishi Metals while Phelps-Dodge took over Zambia Metal Fabricators (ZAMEFA) in Luanshya. Anglo-American once again assumed a more active role, purchasing the largest company, Konkola Copper Mines (KCM), based on hopes for Konkola Deeps. The mine privatization exercise then continued until 2000 when the sale of the Nkana and Mufulira sites to a small consortium running a company called Mopani Copper Mines completed the process. But, according to officials, ZCCM's debts were actually more than cash receipts from the mines' sales covered. Whatever revenue Zambia received at the time of sales went to pay off arrears.241
By late 2001, Chiluba himself was out of office, his attempt to amend the constitution giving him a third term thwarted by public opposition from a now weary and unsettled public.
sirens and periodic underground blasts kept those of us on the periphery mindful of the non- stop production cycle and, in the rainy season, huge thunder and lightning storms demonstrated copper's conductibility. There was a general air of confident expectancy at the time, strengthened undoubtedly by Zimbabwe's simultaneous unraveling just to the south.
2.5.1 Early trouble
The entire arrangement's fragility, however, became apparent in early 2002 with the announcement of a major change for KCM. Less than two years after purchasing the mine Anglo-American announced it was pulling out of the venture—shocking the region and shaking the confidence even of the World Bank.242 KCM's management gave purely economic reasons for the decision. The copper price was so low that it made more investment in Konkola Deeps not worth it.243 With the price per pound hovering around
$0.67 while break-even was at least $0.70, AAC saw no reasonable way it could continue restoration of old sites or take on development of new ones. So, of its 11,000 employees, 7,000 to 8,000 would gradually be laid off or retrenched and the Nchanga open pit would continue on schedule for closure by 2010.244 And, with Anglo's offices now in London rather than Johannesburg and Harry Oppenheimer's death the year before, the board was
The World Bank's published documents from the late 1990s praise Zambia's overall privatization programme as a model of best practices for sub-Saharan Africa. Situmbeko and Zulu, Zambia: Condemned to Debt, 26. See also the various World Bank reports cited herein. After AAC withdrew, the Bank commented that, "significant progress had been made on privatization up until the unraveling of the ZCCM privatization.
By the end of 2002, a total of 254 out of the 280 parastatals under the ZPA had been privatized. The withdrawal of Anglo from Zambia, coupled with the widespread perception that privatization is largely responsible for rising unemployment, created a strong political and popular backlash against privatization."
"Zambia Country Assistance Strategy," 94.
243 In 2002 the price sank to its lowest level in 30 years. Interview with former ZCCM senior executive and current ZCCM-IH manager, 2005.
244 KCM chief executive, as cited in "Enhancing Economic Diversification in Zambia's Copperbelt," Report of a Fact Finding Mission to the Copperbelt by Private Sector Donor Group (August 11-14, 2002): 7.
simply less inclined to stay. " Within a few months, a number of newer ancillary businesses such as restaurants and guesthouses began shutting down.
A second mine, the famous Roan Antelope Mining Company (RAMCOZ) in Luanshya, also stopped production in 2002. Its owners, the India-based Binani Group pulled out leaving, among other things, millions of US dollars' worth in unpaid terminal benefits to its workers. Miners staged demonstrations demanding back payment and at one dramatic public gathering briefly held hostage the Province's deputy minister and the Minister of Mines.246
After agonizing waits by the labor force, new buyers moved in to take over KCM and Luanshya in 2004, but the people were now quite suspicious. The ultimate configuration of Zambia's remaining large parastatals, Zambia Telecommunications (ZAMTEL); Zambia Electric Supply Co. (ZESCO), and Zambia National Commercial Bank (ZANACO), became highly contested as passionate debate carried on in the popular press as to whether they should be left with the government, commercialized, or privatized. But by mid-2005, 262 of 284 possible companies had been sold to private investors.
2.5.2. Lessons learned and questions unanswered
The World Bank and IMF, drivers of a process for which they had initial praise, ultimately admitted perhaps there had been some miscalculations.
Privatization has had mixed results in Zambia mainly due to problems with the implementation and communication of its results to the public at large.
The privatization program originally was driven by the need to stop the financial hemorrhage of loss making state-owned companies and reduce their
5 Interview with long term Copperbelt resident and contracting company owner, 2004; Interview with independent technical consultant assigned to ZCCM privatization project, 2005.
246 "Kafumukache: Refined politician," Zambia Daily Mail (December 9, 2004): 7. See Situmbeko and Zulu, Zambia: Condemned to Debt, for a case study of the RAMCOZ mine.
247 "Privatization: Opportunities Still Abound," The Investor Magazine, no. 2 (Quarter 1, 2002): 19-22.
248 Zambia Privatisation Agency (2005): http://www.zpa.org.zm/.
burden on the national budget. This approach, with a strong focus on "asset sale", enabled potentially profitable companies to survive. As such, the major achievement was "damage control" for almost all of the companies privatized after the establishment of the Zambian Privatization Agency (ZPA) in 1992.
A number of key lessons can be drawn from Zambia's experience with privatization. One relates to the need for accountability, for transparency of behavior and communication during the privatization process. The Privatization Act and institutional framework to implement it were judged as
"models" and execution of large numbers of privatizations through this mechanism was carried out satisfactorily. However, key privatizations in the mining area were implemented in a much less transparent way, at great cost to the Zambian economy. A second lesson is that the private sector resists operating in an environment where fundamental rules are unclear. For example, the rules governing employment and retrenchment are currently ambiguous. This raises expectations of retrenched workers and raises contingent liabilities for Government. A third lesson is that privatization could not be the answer to Zambia's economic difficulties, because privatization could only deal with "survival" issues, but not with
"development" and the creation of a vibrant public sector.249
Lessons the Bank said Zambia's experience taught fell almost entirely within the realm of economics and management, an unsurprising analysis considering the nature of the organization. It bears noting, however, that upon at least a few occasions, the Bank admitted that important cultural issues might have been overlooked in a strategy too quickly implemented.250
Many Zambians' expectations were that privatization would bring immediate benefit to the central bank and the country's economy. But, even though the first mine sales took place in the late 1990s, by the mid-2000s, most people were still waiting for the promised
249 "Zambia Country Assistance Strategy," 7.
50 See various World Bank reports cited throughout this study, especially the country assistance documents of 1996 and 2004. Within the larger picture, the Bank also funded retrenchment and relocation packages for laid off workers. "Basically the huge value at all mines of accrued terminal benefits made the purchasing of the mines an unviable proposition for investors. To assist Zambia, WB gave USD45million, shared amongst the mines. [Our company's] allocation was USD8.75million - and up to them to manage it within the WB rules.
These funds were to be used to pay the terminal benefits and to re-train the retrenchees into a skill which could be used for self-sustenance in the future. The money was very strictly controlled and claimable in arrears of paying out the funds for terminable benefits. Training providers were paid via an auditing company. In addition to doing the counseling and teaching, there was loads of administration." Email to author from departmental manager, Copperbelt mining company, 2005.
better life. Some business owners and managers, while being pleased over their own increased business, recognized that their vantage point wasn't that of the average Zambian.
With privatization they throw you all this jargon about how things are going to get better. We should look at the wider picture, but you will never see the wider picture if you're never totally at grips with what is on the ground...Some people are doing much better [under privatization]. But what has it actually done for the majority of people who aren't head hunted? What has it done for them?251